Chancellor scraps proposed 2p per litre rise in fuel duty from October

Motoring bodies have reacted favourably to the Chancellor’s announcement to scrap the planned October 2p fuel duty rise, but they say more needs to be done.

The RAC Foundation reminds us that the Chancellor still has plans to raise over £2 billion from the motorist through changes to motoring taxes and VED announced in Budget 2008.

The Foundation says that the Government must carry out an urgent ‘root and branch’ review of motoring taxes. “The current system is failing motorists by charging them more and more for increasingly poor levels of service. The difference between taxes taken from the motorist and investment returned to the road network has soared over four hundred percent since the mid 1970s. Today, the Government takes four times as much from the motorist (£31.2bn) as it spends on the roads (£8.2bn).

Sheila Rainger, Head of Campaigns at the RAC Foundation said “The Chancellor has pulled a populist rabbit out of the hat by scrapping the 2p rise, but this is a drop in the ocean compared to the extra £2 billion that the Treasury intends to take from the motorist over the next two years.”

Following a similar theme, the Freight Transport Association says that the Chancellor’s welcome decision to scrap the proposed 2p per litre rise in fuel duty from October must be only the first step in a major review of commercial vehicle taxation. The move will save UK industry £280 million per year.

The FTA’s Director of External Affairs, Geoff Dossetter said “The scrapping of the increase at a time of high world oil prices was inevitable. However, at 50p per litre, UK diesel duty for commercial vehicles is twice the EU average of just 25p per litre.

“The Government must now engage with the industry in order to find a practical means of bringing UK duty more in line with continental competitors. Failure to do so will only result in higher costs for UK industry and higher prices for UK consumers.

“Given that almost everything we consume every day is the product of a lorry journey, then higher fuel prices contribute to price rises for everything else we buy. The Government cannot do much about the world price of oil, but it can reduce UK duty to bring it closer in line with the rest of Europe.

“Today’s announcement is very welcome. But with the price of oil having risen so sharply, the Government needs to re-think its overall strategy on diesel tax.”